The nuclear deal with Iran is gone, lying dead on the rubbish heap of history. It all seemed straightforward on the surface. The Iranians promised to halt the enrichment of uranium and not blow up Israel. In return, the U.S. and the European Union agreed to lift economic sanctions that stunted the Iranian economy. Unfortunately, it did not work that way.
Despite the underwhelming assurances that it was the “best deal that we could get,” people hated the nuclear deal. The agreement ignored Iranian support for terrorism, human rights abuses and the fact that they are the primary military backers of Syrian dictator Bashar Al Assad. The signers of the deal also conveniently skirted the issue that the Iranian military and intelligence services effectively infiltrated the economy.
Now that President Trump killed the deal, sanctions are back, and American might rules the day! Unfortunately, the declarations of victory are premature. For years, the Iranians evaded international sanctions with high-efficiency. Now that the deal is gone, the same players sit waiting to for their chance to start the process again
In the immortal words of Taylor Swift, “The U.S. and Iran are never, ever, ever getting back together!” At one time, Iran and the U.S. were close allies. Under the rule of the fabulously wealthy but inept ruler, the Shah Mohammed Reza Pahlavi, Iran was a liberal country that supported Israel. The U.S. in return for this forward-thinking policy sold Iran jets and weapons. American scientists even helped establish the now infamous Iranian nuclear program.
Unfortunately, just like most of Ms. Swift’s romantic endeavors, the relationship between the U.S. and Iran seemingly crashed in flames. In 1979, conservative students took control of a popular revolution and deposed the Shah, replacing him with the Shiite cleric, Inman Khomeini as the nation’s supreme leader.
From that point on, the Iranian government took U.S. embassy workers hostage, funded terrorism and exchanged missile technology with North Korea and Libya, and threatened to destroy Israel in a nuclear holocaust. In response, the United States placed comprehensive sanctions on Iran. The U.S. froze $12 billion in assets, and banned American businesses from trading with Iran. Further, the U.S. and Europe banned the export of Iranian oil and penalized any company that conducted business in amounts higher than $20 million with substantial fines. Lastly, the U.S. cut Iran off from the American banking system. This made transferring funds for countries that still conducted business with the Islamic Republic difficult.
Despite the sanctions, Iran maintains the second largest economy in the Middle East. It leads in fields such as technology development and biomedical research. The Iranian military also manages to stay formidable, fighting in Syria and providing support to Houthi rebels in Yemen. This came about through clandestine efforts on the part of the Iranian government and some good old criminal activity.
Even though sanctions limit the Iranian industry, the nation still owns a large commercial shipping fleet, known as the Islamic Republic of Iran Shipping Lines (IRISL.) These ships regularly travel to countries with historical and ideological ties to the Iranian people. At the port of calls in countries such as Venezuela, Sudan or North Korea, ships are loaded with illicit cargo, and false manifests are written — concealing the true nature of the voyage.
Before the nuclear deal, sanctioned Iranian oil still found its way to the open market. A fleet of over 50 aging oil tankers that the National Iranian Tanker Company would regularly set out to sea and then turn off their automatic GPS beacons, traveling “dark.” Then, in international waters, the tankers linked up with ships from countries like China and transferred their contents. With the transactions completed, intermediaries made payments to the Iranians at a rate that was well under the standard price of crude oil.
While shipping will play a part in evading future sanctions, the most significant role will fall to the Islamic Revolutionary Guards Corps (IRGC). Created as a parallel force to the conventional military, the Guards initially served as an internal security and intelligence force, loyal only to the Supreme Leader. The IRGC quickly developed into the nation’s dominant military force, conducting the bulk of Iranian fighting in Syria and runs covert operations abroad. Due to their political reliability, many former Guardsmen hold key positions in both the government and private sector. These are also the critical individuals needed to evade sanctions.
Before the Islamic Revolution, few people could match the wealth of the Shah of Iran. He was a certified billionaire, owning 50 construction companies and nearly every hotel in the nation. When the revolt against him grew stronger, he knew the writing was on the wall, and he fled. In January of 1979, he loaded his family and as much loot as they could carry on to a jet and flew away.
Before his fall from power, he set up a network of charities called Bonyads, which were a tax shelter used to dole out patronage to supporters. After his escape, the new government collected his assets (and those of his dead friends that he left behind), placing them into the Bonyads. The stated purpose was to help orphans and widows from the revolution and the Iran – Iraq war, but, the patronage system carried on much as it did before.
Today, the Bonyads are worth billions of dollars. These charities own banks, chemical companies, hotels and construction firms. Not surprisingly, the IRGC and former Guardsmen quickly took control of the Bonyads. They maintain a beneficial ownership system, hidden from public view, allowing them to use the charities as front companies.
One example is Mehr Bank in Tehran, which was sanctioned for financing weapons of mass destruction. The bank’s website makes no mention of ownership. However, Bonyad Tavon Sepah a charitable organization controlled by the IRGC owns the bank. Numerous businesses throughout Iran maintain beneficial ownership for the Guards, providing them with millions of funds, at the expense of regular activities in the private sector.
The influence of the Bonyads even reaches to the United States. Before the Islamic Revolution, the Shah Mohammad Pahlavi established a charitable organization to advance his reputation among Americans. After his fall from power, he lost control of the organization and ownership of its skyscraper headquarters located at 650 Park Ave, in New York City, known as the Piaget Building. The charity rebranded itself as the Alavi Foundation, which furthered Islamic society in America.
In 2014, the FBI seized the Piaget building, alleging the Alavi Foundation is a front company for the IRGC. The Alavi foundation protested the seizure all the way to the Supreme Court. Ultimately, the Justice Department argued that the Alavi Foundation and its assets belong to Bonyad Mostazafin. This Bonyad owns over 40 subsidiary businesses as holds $12 billion in assets, which are in turn controlled by the IRGC. In the end, the seizure stood and proceeded in 2017.
What makes the Alavi Foundation such an effective front company is the fact that it is a legitimate charity. Rather than just setting up a P.O. Box or a back corner of an office park. The Alavi foundation provides funding for mosques and coordinates educational initiatives for Islamic studies at prestigious institutions like Princeton and Columbia University. Layers of legitimate activity effectively obscured the actual ownership of the organization. This allowed the IRGC to recoup millions of dollars and profits over the years.
Iran sits at the center of the old “Silk Road” that once spanned from China to Africa. Trade routes that predate Islam crisscross the country leading to Iraq, Turkey, Syria, Afghanistan and the strait of Hormuz. Not surprisingly, the IRGC controls the border crossings into Iran. For a cut of the profits, Guards commanders ensure that opium and heroin cross the Afghan border without incident. Since the IRGC also controls the sea and airports. Drugs move through customs and on to users looking for a fix around the globe.
For a time, the Iranian and Venezuelan governments had a flight route that transported drugs and cash between the two countries, dubbed “Areoterror.” On a bi-weekly basis, IRGC operatives and individuals associated with Hezbollah boarded an airliner bound for Venezuela. After a layover in Damascus to obtain fake Venezuelan passports, the flights landed in Caracas. The return flights carried weapons and other materials along with returning Hezbollah agents and cocaine to sell in Damascus.
Despite President Trump’s withdrawal from the nuclear deal, the world remains eager to do business with Iran. Over 60% of Iranians are under the age of 30, and they desire consumer goods. Oil companies and manufacturers immediately established deals almost immediately after the ink dried on the treaty. With the return of sanctions, the Iranians will not give up on this newfound prosperity so easily.
When appropriately applied, sanctions inflict massive amounts of financial damage. By 2013, the Iranian Rial lost 30% of its value on the currency markets. Many experts claim that this drove Iran to the negotiating table for the nuclear deal. Unfortunately, the U.S. lacks the support of key European allies. Due to this fact, the American military and intelligence community must be especially vigilant to prevent the Iranians from effectively evading sanctions with greater ease and efficiency than ever before.
Featured image: Qasem Soleimani, commander of Quds Force of Army of the Guardians of the Islamic Revolution (IRGC.) By sayyed shahab-o- din vajedi [CC BY 4.0], via Wikimedia Commons
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